Value for Money
Financial services regulation: Adapting to change
Published 8 December 2023
4 recommendations
HM Treasury
Banks and financial servicesBusiness and industryCommercial marketsEconomic growthRegulation
nao.org.uk
Our report looks at how the Financial Conduct Authority is responding to changes in its regulatory powers and wider developments in the financial services sector.
Recommendations (4)
Source: NAO Recommendations Tracker
Financial Conduct Authority; HM Treasury
Rec 1
Accepted
Work in Progress
When appropriate, work with HMT and other stakeholders to review the effectiveness of new accountability arrangements. It will be important for both the FCA and HMT for there to be timely review of the new arrangements for scrutiny required under FSMA 2023. HMT and the FCA should therefore support any such review where it touches on their areas of responsibility. The review should consider both of their perspectives as well as those of firms and consumers. The review should consider whether the accountability arrangements are achieving intended outcomes and their impact on the FCA?s ability to regulate effectively. The review could cover areas including:
? the FCA?s processes for engagement with stakeholders, industry and consumers as it makes or amends rules;
? the quality and proportionality of cost-benefit analysis;
? the operation of the FCA?s rule review framework in practice; and
? practical considerations of the new accountability arrangements. For example, if HMT uses its powers to call for new rules or rule reviews or for FCA to publish information, the review could consider the impact of this on the FCA?s forward plans and resourcing requirements.
Financial Conduct Authority
Rec 2
Accepted
Implemented
By autumn 2024, consider and plan how to make changes to provide clarity and coherence within its external reporting on performance. As the FCA develops its new mechanisms for accountability, it needs to ensure it can explain its performance clearly to stakeholders. This might involve developing a core set of performance metrics, and testing their presentation and reporting with stakeholders to ensure the FCA articulates performance in a transparent and understandable way. This is likely to be an incremental process that takes place over a number of business reporting cycles.
Financial Conduct Authority
Rec 3
Accepted
Implemented
By December 2024, ensure it has the operational processes it needs to manage the scale of change it has in motion. The FCA?s operational changes are far-reaching and will continue to take time to move into operation. The FCA needs to make sure that as its projects get closer to their planned end dates, it has considered and put in place the mechanisms needed to prioritise or take action if they take longer than expected, need additional staff or other resources, or fail to have the impact needed.
Financial Conduct Authority
Rec 4
Accepted
Implemented
By September 2024, building on the FCA?s current work to develop its strategic workforce planning, develop and maintain a long-term plan for workforce needs. The nature of the FCA?s work means that the areas of its operations which are under most demand change as it responds to changes in the market. The FCA does not expect to make further significant changes to staffing in the medium term, and must therefore ensure that it can use its staff flexibly to meet future strategic needs. The FCA should therefore build on its current strategic workforce planning development to ensure it has a continuing long-term plan for workforce needs including maintaining expertise in specific key areas and training staff to be able to move as needed.